- 5 -
had kept as the practice’s primary bookkeeper. Using these
records, Mrs. Rinn identified for RA Hutchinson items of income
and expense from the dental practice. RA Hutchinson then
prepared written summaries of the income, expenses, and net
profits from the dental practice, allowing all the expenses that
Mrs. Rinn had identified.4
On the basis of the records that Mrs. Rinn had provided and
the written summaries that RA Hutchinson had prepared, respondent
determined deficiencies in Mr. Rinn’s 1995 through 2000 Federal
income taxes.5 On the basis of this information, respondent
separately determined deficiencies in Mrs. Rinn’s 1995 through
2000 Federal income taxes, treating the dental practice income as
community property income, half of which was allocable to her.6
4 RA Hutchinson entered into a computer database
petitioners’ canceled checks for 2000. To test the accuracy of
the records that Mrs. Rinn provided, RA Hutchinson compared them
to this database, matching the payees, dates, and amounts on the
checks to the entries in Mrs. Rinn’s records. In addition, RA
Hutchinson matched the records to bank statements, canceled
checks, and receipts and also matched the records to a deposit
analysis of petitioners’ accounts.
5 RA Hutchinson failed to include an allowable expense of
$14,895.79 and made a $36 computational error in adding the
allowable expenses. The notices of deficiency corrected these
errors.
6 Ostensibly in an effort to avoid any whipsaw effect,
respondent made superficially inconsistent determinations with
respect to Mr. and Mrs. Rinn: he determined Mr. Rinn’s
deficiencies on the basis that he was taxable on all his 1995
through 2000 dental practice income, while also counting 50
percent of the 1995 through 2000 dental practice income as
(continued...)
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